AS 13 Accounting for Investments is widely used and deals with accounting for investments in financial statements prepared by a Company and prescribes various disclosure requirements.
AS 13 Accounting for Investments doesn’t deal with the following:
A. Current Investments – Current Investments are investments which by their nature are readily realizable and are intended to be held for less than a year from the date when such investment is done.
B. Long-Term Investments – Long-term investments are investments other than the current investments, even though they might be freely marketable.
the cost of acquisition is the fair value of securities which are issued or the assets which are given up. The fair value might not essentially be same as the par or nominal value of securities which are issued. It might be prudent to consider fair value of such investment acquired in case it’s more evident
However, in certain conditions, such inflows signify a recovery of the cost and doesn’t form part of the income. In case it’s difficult to do such allocations, cost of investment is usually reduced to the extent of dividends receivable only in case they represent clearly the recovery of a portion of the cost
In case the rights aren’t subscribed for, however, are sold, sale proceeds from the sale of such rights are transferred to P/L statement. But, where an investment is acquired on a cum-right basis and market value of the investment immediately after becoming ex-right is less than the cost for which such investment was acquired, it might be prudent to apply the proceeds from the sale of rights to reduce carrying the amount of the investment to the market value
Current investments must be carried in financial statements at lower of cost and fair value which is determined either by category of investment or on an individual investment basis, however, not on the overall basis.
Long-term investments must always be carried in financial statements at their cost. But, when there’s a decline, apart from temporary, in value the long-term investment, carrying amount is reduced for recognizing such decline.
Investment property is investments that are made in land or buildings which aren’t envisioned to be used significantly for use, or in business operations of, the investing company.
On sale or disposal of the investment, the difference between the carrying cost and proceeds from the sales net of any expenses is transferred to P&L.
Where a long-term investment is reclassified as a current investment, the transfer is made at carrying amount and lower of cost at the date of such transfer. Where an investment is reclassified from current investment to long-term investment, the transfer is made at the lower of its cost and the fair value of such investment at the date of such transfer.
The below mentioned are the disclosures in the financial statements with respect to AS 13 Accounting for Investments is applicable:
(a) accounting policies employed for determining carrying amount of investment
(b) the amounts which are included in the profit and loss statement for:
(i) Dividends, interest, and rentals on the investments presenting the income from such long-term and current investments separately. Gross income must be stated, amount of TDS (tax deducted at source) included under the Advance Taxes Paid
(ii) profits and losses on the disposal of current investment and the changes in carrying the amount of the investment
(iii) profits and losses on the disposal of long-term investment and the changes in carrying the amount of the investment
(c) substantial limitations on the right of ownership, realizability of the investments or remittance of income and proceeds of disposal
(d) the total amount of both the quoted and unquoted investments, providing the total market value of the quoted investments
(e) other disclosures as explicitly as required by the relevant statute governing the company
|Particulars||AS 13||Ind AS 40|
|Guidance on Investment property||AS 13 provides limited guidance over investment property||Ind AS 40 provides a complete and separate guidance in this regard|
|Inclusion of leased property||AS 13 is silent with respect to property held by the lessee under a finance lease||Ind AS 40 covers property that is held by the lessee under a finance lease|
|Definition of Investment property||AS 13 defines an investment property||Ind AS 40 explicitly distinguishes between owner occupied-property and investment property|
|Recognition criteria||AS 13 is silent with respect to any such treatments||Ind AS 40 covers the recognition criteria under various scenario|